THE SOUTHLAND FIRESTORM: CONSUMER IMPACT : Q&A; : Getting the Most Out of Your Policy

All homeowners--whether or not they lost their homes in Southern California’s devastating blazes--would benefit from learning how the insurance trade handles claims from fires and other disasters, experts say.

The seemingly trivial details of your homeowners policy--and the way you handle the insurance adjustment process--can determine whether you come out of a disaster financially whole. Time and coverage limits, co-insurance clauses and the vagaries of cash value versus replacement value can cost you thousands of dollars, insurers note.

For instance, the typical homeowners policy has as many as five separate coverage limits--one each for structure, contents, landscaping, separate structures such as guest houses and temporary living allowances. You may be able to increase the amount you receive by closely monitoring which coverage each check is written against.

Here’s a question-and-answer look at some “tricks of the trade.”

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Q. I have a $200,000 homeowners policy. Does that mean that is the total amount I can claim?

A. No. It’s just the start.

That $200,000 limit usually applies only to the cost of replacing the structure of your home. Typically, your policy will pay up to $100,000 more--half of the face amount of the policy--to replace the home’s contents, including valuables.

If you have a separate structure on the property--a garage, shed or guest house--that’s probably covered separately. Your landscaping is also covered separately. And most policies also provide an additional amount to cover living expenses if you are displaced by the fire.

So a homeowner with a $200,000 policy could get $200,000 to rebuild, $100,000 for personal effects, $10,000 to relandscape, $10,000 to rebuild the garage and $25,000 to cover temporary living expenses--a total of $345,000.

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Q. How much should I expect to get for living expenses?

A. That depends on what you lost. Policies normally cover the cost of renting a comparable home or apartment. If you can figure out what the rental value of your home was, that’s usually the amount you can get reimbursed for renting another place, says Larry Arnold, a partner in the Santa Ana Heights law firm Cummins & White.

In addition, temporary living allowances pay for all other extraordinary expenses caused by your displacement. These might include boarding a pet in a kennel, renting furniture--or paying to store furniture that survived the fire--and eating at restaurants while you’re in a hotel or motel without kitchen facilities.

Insurers will not pay ordinary living expenses such as groceries, regular evenings out, ordinary utility bills and so on.

Some insurers limit temporary living expense payments either by a dollar amount or a time period; for example, payments might be made for no longer than a year or two. Some insurers limit by both time and dollar amount; others have no limitations.

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Q. My insurer is offering me a $2,500 payment to cover my temporary living expenses. I think I’ll need more. Can I ask for more money?

A. Absolutely. But it helps if you’re prepared to give reasons.

For instance, you know it’s going to cost $3,000 to pay a deposit and the first month’s rent on a comparable home. And you can reasonably expect to spend at least $1,000 replacing enough clothing, shoes and personal items to get by for a few months.

In a case like this, you’d be justified asking for at least $4,000. But realize that up-front payments are entirely voluntary; insurers can require you to incur the expenses first and be reimbursed later.

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Q. My insurance adjuster has already offered me a payment of $5,000, which I was going to use to buy some clothes and rent an apartment. Is that payment part of my temporary living allowance or does it come out of my contents coverage?

A. Ask your adjuster. In some cases, it would be considered simply a temporary living allowance. In others, it may reduce the amount you have left to claim on your contents coverage.

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Q. I want to buy some dishes and kitchen utensils, but I’m not ready to go out and replace the nice dishes I had. If I buy a cheap set of plates, will I have trouble later convincing the insurer to pay for the valuable dishes I lost?

A. You could, attorney Arnold says, but you should realize the adjustment process is a negotiation, and knowing your rights can be pivotal.

In this case, you usually have the right to rent furniture, dishes and anything else you need until they are replaced, he says. But that’s expensive--perhaps more costly than buying an inexpensive set.

If you present your options to the adjuster, he or she may be willing to allow a purchase to go under your temporary living expense coverage rather than contents coverage. That should eliminate limitations on replacing your more costly items down the road.

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Q. Do I need to file a claim--or replace my furniture and valuables--within a set period of time?

A. Yes. You usually must notify your company of a loss within 60 days.

There are also time limits on how long you can wait to replace goods, how long you can delay before disputing a payment and how long you can wait to file suit if things really go poorly with your insurance coverage. All these limitations should be noted in your insurance policy. If you’re confused or feel you can’t meet a deadline, ask about it.

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Q. The cars in my garage were also destroyed. Are they covered?

A. They’re generally covered by your auto insurance policy, not your homeowners insurance.

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Q. I haven’t bothered to update my policy in years, and now I realize the amount of coverage I have is woefully inadequate. Does that mean I’ll just get the maximum on my policy, regardless of the amount of losses I have?

A. Sometimes, yes. However, on some old policies there’s a more significant risk, called implied “co-insurance.”

Here’s how it works: You have a house that would cost $200,000 to replace, but your policy has a $100,000 limit. Your insurer can maintain that you were purposefully taking on some of the risk of insurance--in this case, 50% of the risk. Now, let’s say you have a $150,000 loss, including contents and structure. While that would be fully covered if you were adequately insured, in this case the insurer may say the coverage is half that, or $75,000.

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Q. I’m still confused. How can I get more information?

A. Call the Western Insurance Information Service, an industry-sponsored educational organization, at (800) 397-1679. If you have a dispute with your insurer, call the California Department of Insurance consumer hot line at (800) 927-HELP.

Assessing Your Coverage

Here’s what a typical homeowners policy does and does not cover when it comes to fire damage.

Structure: Covered to limits of dollar value of policy. Fire insurance covers replacement of the exact stucture of your house, including walls, roofs, plumbing, wiring, wall-to-wall carpeting, molding, windows, etc.

Valuables: Coverage usually has $2,500 maximum. If you have jewelry, furs, cameras and guns worth more, you need an insurance “rider” to cover them separately.

Brush and Shrubbery: Covered to set limits, usually 5% of the structure coverage ($10,000 on a $200,000 policy). Some companies also limit coverage.

Contents: Coverage usually limited to 50% of structure amount. In other words, if you have a $200,000 policy, up to $100,000 in contents is typically covered. Your furniture, appliances, clothes, dishes--everything down to the pencils in the junk drawer--are covered.

Temporary living expenses: Limited coverage. Your hotel room, rent on a house or apartment, meals and all other extraordinary expenses caused by displacement are reimburseable. These expenses are generally limited by a dollar amount or time.

Valuable papers: Coverage usually limited to $1,000 maximum. Additional coverage for loss of deeds, securities and letters of credit can be purchased through an insurance rider.

Code upgrades: Usually not covered. If rebuilding according to current building codes is more expensive than it would have been under codes existing when your house was built, you may have to pay for the upgrades.

Decks, patios and driveways: Covered under “structure” coverage and will be replaced, if damaged, up to policy limits.

Pets: Kennel expenses covered. If your pets need to be boarded while you’re in temporary quarters or while you’re looking for a home or apartment, your “temporary living allowance” should pay the expenses.